(a) Judgment Fund. The Contract Disputes Act (CDA) provides that the Judgment Fund (“the Fund”) may be used to pay for adverse judgments against the Government. Settlement agreements in CDA cases before the Armed Services Board of Contract Appeals may be converted into consent judgments to access the Judgment Fund to pay for settlements under certain circumstances. Settlement in CDA cases before Federal Courts where the Army is represented by the Department of Justice (DoJ) may use DoJ’s independent authority to use the Judgment Fund for settlements; however, the policy set forth herein shall be followed by Army contracting activities. The Judgment Fund must be reimbursed with funds current as of the date of the judgment.
(b) Fiscal Considerations in Settlements. If funds appropriate to pay a settlement are expired but the account remains open, Contracting Officers must use expired funds to pay the settlement. If the account remains open but no expired funds remain, Contracting Officers must use the Judgment Fund to access current funds to pay the settlement. Access to the Fund requires a consent judgment from the Board or use of the Department of Justice’s independent authority to use the Fund. If accounts appropriate to pay a settlement are canceled/closed, Contracting Officers may use current funds to pay the settlement.
(c) Settlement Procedures.
(1) The Army shall assign responsibility, within the Office of the Assistant Secretary of the Army (Financial Management and Comptroller) (ASA(FM&C)), for tracking available expired funds within the Service. The ASA(FM&C) shall insure that financial managers throughout the Service are aware of the requirements set forth herein and are prepared to expeditiously assist contracting officers to comply with these procedures.
(2) The following procedures for settlements shall be followed by the Army.
(i) In situations where contract funds have expired but the accounts have not closed, settlements shall be funded with expired funds if available. Contracting Officers will ascertain the availability of appropriate expired funds, through financial management channels, from the ASA(FM&C).
(ii) If the Assistant Secretary (FM&C) determines that no expired funds exist within the Army to fund the settlement and the accounts are not closed, the Contracting Officer must access the Judgment Fund through a consent judgment in order to use current year funds to pay the settlement (i.e., reimburse the Fund). The reimbursement point of contact (POC) is the ASA(FM&C) or his/her designee.
(iii) If no expired funds exist but the account remains open, the following procedure will be followed. If the contracting officer has current year funds available to reimburse the Fund, then he/she shall set aside the funds and may enter into a consent decree and allow the Fund to pay the judgment. The contracting officer will then coordinate with the Fund POC indicated on the Financial Management Service (FMS) Forms (ASA(FM&C)) to accomplish reimbursement of the Fund. If the contracting officer does not have sufficient current funding to reimburse the Fund, he/she will contact the ASA(FM&C) for authorization prior to entering into a consent decree.
(iv) If the accounts are closed, the following procedure will be used. If the contracting officer has sufficient funds to pay the settlement, he/she will not use the Fund, and pay the settlement with Agency funds. If sufficient current funds are not available, the contracting officer must obtain approval from ASA(FM&C) to enter into a consent judgment to access the Fund.
(v) When use of the Judgment Fund is authorized, the contracting officer shall fill out the appropriate Certificate of Finality and Financial Management Service forms (FMS Forms 195, 196, 197A and 198 (if appropriate)) and submit the payment request to the FMS. The “reimbursement contact” on FMS Form 196 shall be the ASA(FM&C) or his/her designee. Copies of the FMS forms sent to the FMS shall simultaneously be forwarded to the ASA(FM&C). The ASA(FM&C) shall insure prompt reimbursement by the Army to the Fund.
(d) Judgments. The following procedures shall be used to pay judgments using the Judgment Fund.
(1) The contracting officer shall ascertain the availability of current funds through financial management channels, if necessary through ASA(FM&C). If current funds are available, the contracting officer will not use the Fund, and will pay the judgment with Agency funds.
(2) If current funds are not available, the contracting officer will pay the judgment using the Fund and notify the ASA(FM&C).
(e) Settlement agreements. All settlements converted to consent judgments and funded by the Judgment Fund shall be in writing and contain appropriate release language. The contracting officer, local attorney and trial attorney shall insure that all settlement amounts are fair and reasonable.
(f) Expeditious handling. Inquiries and approvals required by these procedures may be oral so long as they are documented by memorandum for record. Settlements are often time-sensitive and these procedures should be carried out expeditiously.
